Auto Insurance Reimbursement For Totaled Vehicles: What's Covered?

If your car is damaged in an accident, your insurance company may deem it totaled or a total loss. This means that the cost to repair the damage exceeds the vehicle's book value at the time of the crash. When this happens, the insurance company will reimburse you for the actual cash value (ACV) of the car, minus your deductible. The ACV is calculated based on the car's make, model, year, mileage, pre-loss condition, and the sales price of similar cars in your area. You have the option to keep the car and repair it yourself, but the insurance payout will be reduced by the car's salvage value, and you may have trouble finding insurance for a car with a salvage title.

How is a total loss calculated?

When a car is involved in an accident, the insurance company decides whether to repair or replace the vehicle. If the cost of repairs exceeds the vehicle's value, the insurance company will total the car. This calculation is based on the vehicle's actual cash value (ACV) and the cost of repairs. The ACV is calculated by subtracting depreciation from the cost to replace the car. Factors like mileage, condition, and market demand can influence depreciation. The cost of repairs includes the cost of labour and parts.

In some states, the total loss threshold is the percentage at which the insurance company must declare a vehicle a total loss. This percentage varies but typically ranges from 50% to 100%. This means that if the cost of repairs exceeds a certain percentage of the vehicle's value, it is considered a total loss. For example, if the repairs cost $10,000 and the car is worth $20,000, the repairs would need to be more than $10,000 (50%) for the car to be considered a total loss.

Other states use a total loss formula (TLF) to determine whether a vehicle is a total loss. The TLF adds the cost of repairs and the scrap value of the vehicle. If this value is higher than the ACV, the vehicle is considered a total loss. For example, if the repairs cost $10,000 and the scrap value is $2,000, the total cost would be $12,000. If the ACV of the vehicle is less than $12,000, it would be considered a total loss.

It's important to note that each state and insurance provider may have different methods for calculating total loss, and it's always a good idea to review your insurance policy and understand the terms and conditions.

What happens when an insurance company totals a car?

When an insurance company totals a car, it means that the cost of repairing the vehicle exceeds its value, or that the vehicle is unsafe to drive, even after repairs are made. Each insurance provider has a formula for determining whether or not to total a car, but there are three main factors that insurance companies use to make this decision:

• If the damage is severe and the vehicle cannot be safely repaired, it is considered totalled.
• If the cost of repairs exceeds the value of the vehicle, it will be totalled.
• State regulations may dictate the amount of damage a vehicle can sustain before it is totalled.

When a car is totalled, the insurance company will reimburse the owner for the vehicle's actual cash value (ACV) immediately before the loss occurred. This includes a reduction in value for depreciation and is determined by factors such as the vehicle's year, make, model, and mileage. The insurance company will then take possession of the totalled car.

If there is a loan or lease on the vehicle, the settlement check will go to the lender or leasing company for the remaining balance. If the owner owns the car outright, they will receive the check directly. It is important to note that the insurance company will never pay more than the vehicle's ACV.

In some cases, the owner may choose to keep the totalled car. In this situation, the insurance company will deduct the amount they would have received from selling the car to a salvage yard from the ACV settlement. The owner will then need to complete any necessary repairs and apply for a new title, as the car will have a salvage title.

The process of dealing with a totalled car can be stressful, but understanding the steps involved and the options available can help owners navigate this difficult time.

What happens if my car is totaled and I'm not at fault?

If your car is totaled and you're not at fault, the first thing you need to do is file an insurance claim. This involves reporting the accident to both the at-fault party's insurance company and your own insurance company. The at-fault driver's insurance company will likely ask for the date and location of the accident, information about your vehicle, and any injuries you suffered. You will also need to provide the name of the other driver, their insured, and whether the police placed any charges.

After filing a claim, you should get your car damage inspected at an auto shop. You can tow your car to any auto shop, but taking it to one approved by the insurance adjuster handling your claim can simplify the process. The shop will provide the insurance adjuster with an estimate for repairs, who will then determine whether to total the car.

It's important to gather the necessary paperwork, including your car's title, as you may need to sign it over to the insurance company. Keep track of related paperwork, such as bills or professional damage assessments, and review your car loan to know the remaining balance. It's also a good idea to research your car's actual cash value (ACV) to ensure the insurance adjuster's estimate is accurate.

In most cases, the insurer of the at-fault driver is responsible for paying accident-related losses. If the at-fault driver does not have insurance, you can use your uninsured motorist insurance (UIM) or collision coverage to file a claim. However, if you don't have valid insurance, your options for compensation may be limited.

The insurer will compensate you for the determined value of the vehicle before the accident, but they won't replace your car or guarantee that the pre-accident value will be enough to purchase a replacement. You usually cannot keep the wrecked car to sell or use for parts, as the insurer will take possession of the totaled car and sell it or put it back on the market as a salvage-titled vehicle. However, you may be able to negotiate with the adjuster to keep your totaled vehicle.

To maximize your payout, it's important to provide comprehensive information to support your claim for reimbursement. This includes out-of-pocket expenses, an appraiser's report, and any medical bills. Modifications to your vehicle, such as an improved stereo system or new tires, should also be considered when determining the ACV of your car.

If you disagree with the insurance adjuster's estimate of your car's value, you can provide arguments and evidence for a higher estimate. If the insurer is unwilling to adjust their valuation, you may need to consider legal options, such as suing them in civil court.

Can I keep a totaled vehicle?

Yes, you may be able to keep a vehicle that has been totalled, but this depends on the laws of the state in which you live. If you want to keep the car, you'll need to contact your insurance company and inform them of your wish to retain the vehicle.

If you're allowed to keep the car, you won't be able to drive it right away. You'll need to have it repaired and pass a state inspection. You'll then be given a rebuilt or salvaged title for the vehicle, which you'll need to provide, along with proof of inspection, to your local DMV to register the car.

You may also encounter difficulties insuring a vehicle with a rebuilt or salvaged title. Some insurance companies will only provide liability coverage for such vehicles, rather than comprehensive or collision coverage.

If you don't plan on driving the vehicle, you could keep and use it for parts, sell it to a junkyard or salvage yard, or donate it to a local charity.

How much does insurance pay for a totaled car?

If your car is totaled in an accident, your insurance company will pay you the vehicle's actual cash value (ACV) or fair market value, minus your policy's deductible and any other fees you may owe. The ACV is the resale price of your vehicle before it was involved in a major accident.

The ACV of a totaled car is determined by factors such as the vehicle's year, make, model, and mileage. The insurance company will search recent sales in your area of vehicles similar to yours and compare them to current listings to find your car's ACV. They will also consider your car's trim level, options, mileage, and pre-accident condition when determining the ACV.

It's important to note that the payout amount for your totaled car may not cover what you paid for the car, the cost of buying a new car, or the remaining balance on your auto loan. In the case of a leased vehicle, the insurance company will pay the amount you owe to your loan provider, and if there is anything left, you will receive the rest.

Additionally, the formula for determining whether a car is "totaled" varies by state and insurance provider. Some states use a total loss threshold, where a car is declared a total loss when the cost of repair exceeds a certain percentage of the car's ACV. Other states use a total loss formula, which takes into account the fair market value, repair value, and salvage value of the vehicle.

If you disagree with the insurance company's settlement offer for your totaled car, you may be able to negotiate for a better settlement by providing supporting documentation such as a list of your car's features, estimated retail value, and comparable sales for similar vehicles in your area.

Frequently asked questions